BSP proposes liquidation of NSC to reduce banks' burden

BUSINESSWORLD (PHILIPPINES)

August 30, 2000

LENGTH: 373 words

HEADLINE: BSP proposes liquidation of NSC to reduce banks' burden

BODY:

The Bangko Sentral is pushing for the "liquidation and reconstitution" of ailing National Steel Corp. (NSC) as a new company to ease the bad loan burden of the banking system.

"The resolution of this issue will be a tremendous benefit to the creditor banks," Bangko Sentral Gov. Rafael B. Buenaventura said on the NSC debt issue.

The central bank chief yesterday met with NSC receivership committee chairman Monico Jacob to iron out details of the proposal.

Total non-performing loans (NPLs) of the commercial banking system stood at P205 billion as of end-June, out of a total loan portfolio of P1.4 trillion.

Mr. Buenaventura said the resolution of the debt restructuring cases of NSC and retailer Uniwide Holdings, Inc. will wipe out some 13.9% from the banking system's bad loan books.

As of the first half, the banking system's NPL ratio stood at 14.65% - its highest level since the start of the East Asian financial crisis in 1997 - due to sluggish loan growth.

"NSC alone will ease the NPLs by about 5%, and will be a big boost for large creditors like the Philippine National Bank (PNB)," Mr. Buenaventura said.

Due to the steel maker's troubles and the poor state of the steel industry, the Bangko Sentral chief believes that liquidation is the best option available to creditors.

"Liquidating and restarting it as a new entity may the only way to go," he said. "Then we can sell the company to a strategic investor."

All local creditors have signified their intention to convert their loan exposures into equity in the new steel company, he said.

"The only obstructions are some legal entanglements on the Malaysian side," Mr. Buenaventura added.

Malaysian conglomerate Hottick Investments, Ltd. bought 80% of NSC from the National Government in 1996 and has since incurred loans worth P16.5 billion from various local banks.

Aside from PNB, which is NSC's biggest creditor with P5 billion, state-owned Land Bank of the Philippines also has an exposure of P1.2 billion, while 14 other banks make up the balance.

NSC's Malaysian owners are reportedly opposed to either infusing fresh equity to resuscitate the steel giant or allow their ownership to be diluted by other potential investors.

LANGUAGE: English

LOAD-DATE: August 30, 2000